New bank lending in China declined more than anticipated in October compared to the previous month, undershooting analysts’ forecasts as efforts to stimulate the slowing economy failed to drive credit demand.
Chinese banks issued 500 billion yuan ($69.51 billion) in new yuan loans in October, a significant drop from September and below analysts’ expectations, according to data from the People’s Bank of China (PBOC).
A Reuters survey of economists had projected new yuan loans to decrease to 700 billion yuan in October, down from 1.59 trillion yuan in September and 738.4 billion yuan in October last year.
Although the PBOC does not provide monthly details, Reuters derived the October data by comparing the central bank’s January-October totals with those of January-September, as released on Monday.
The People’s Bank of China (PBOC) doesn’t publish monthly breakdowns, but Reuters estimated October’s lending figures by comparing the PBOC’s January-October data released on Monday with its January-September totals.
The PBOC reported that new yuan loans reached 16.52 trillion yuan for the first ten months of the year.
Chinese policymakers have been striving to address further economic weaknesses that have emerged recently, driven by a prolonged slump in the property market and rising local government debt.
One key objective is to manage the fallout from a significant debt burden accumulated from stimulus efforts during the 2008-2009 global financial crisis.
On Friday, China announced a 10 trillion yuan debt relief package to help alleviate local government financial pressures and support slowing economic growth, as it faces renewed challenges following Donald Trump’s re-election as U.S. president.
Finance Minister Lan Foan stated that new measures will include issuing sovereign bonds to bolster major state banks’ reserves and implementing policies to support the purchase of unused land and unsold apartments from developers.
Analysts remain skeptical that these measures will deliver a quick boost to economic activity, as much of the new funding is expected to go toward reducing local government debt. However, China’s central bank stated it would maintain supportive monetary policies to foster a favorable financial environment for growth.
The PBOC also announced plans to review and adjust money supply statistics to provide a clearer picture of the country’s actual monetary conditions.
Donald Trump’s election victory could drive China to consider a stronger fiscal package in anticipation of economic challenges, as Trump previously threatened tariffs exceeding 60% on U.S. imports of Chinese goods, raising concerns for China’s industrial sector.
Broad M2 money supply grew 7.5% year-on-year, according to PBOC data, surpassing analysts’ forecast of 6.9% from a Reuters poll. In comparison, M2 grew 6.8% in September year-on-year.
Outstanding yuan loans grew by 8.0% in October compared to the previous year, slightly below analysts’ expectations of 8.1% growth, which matched September’s pace.
Total social financing (TSF), a comprehensive gauge of credit and liquidity in the economy, slowed to a record low growth rate of 7.8% in October, down from 8.0% in September. An increase in government bond issuance could help support TSF growth.
TSF encompasses various forms of financing beyond traditional bank loans, including initial public offerings, trust company loans, and bond sales.
In October, TSF decreased to 1.4 trillion yuan, down from 3.76 trillion yuan in September. A Reuters poll of analysts had predicted TSF would reach 1.55 trillion yuan.
